Exchange Rate Fluctuations and Trade Flows Evidence From the European Union

This paper analyzes the effects of exchange rate volatility on bilateral trade flows. Through use of a gravity model and panel data from western Europe, exchange rate uncertainty is found to have a negative effect on international trade. The results seem to be robust with respect to the particular m...

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Bibliographic Details
Main Author: Dell'Ariccia, Giovanni
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 1998
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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245 0 0 |a Exchange Rate Fluctuations and Trade Flows  |b Evidence From the European Union  |c Giovanni Dell'Ariccia 
260 |a Washington, D.C.  |b International Monetary Fund  |c 1998 
300 |a 27 pages 
651 4 |a Portugal 
653 |a Government and the Monetary System 
653 |a Payment Systems 
653 |a Balance of trade 
653 |a International Trade Organizations 
653 |a Regimes 
653 |a Monetary economics 
653 |a Trade Policy 
653 |a Trade: Forecasting and Simulation 
653 |a Trade balance 
653 |a Currency 
653 |a Exports and Imports 
653 |a Plurilateral trade 
653 |a International economics 
653 |a Money 
653 |a Foreign Exchange 
653 |a Standards 
653 |a International trade 
653 |a Currencies 
653 |a Monetary Systems 
653 |a Real exchange rates 
653 |a Empirical Studies of Trade 
653 |a Exchange rates 
653 |a Money and Monetary Policy 
653 |a Foreign exchange 
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520 |a This paper analyzes the effects of exchange rate volatility on bilateral trade flows. Through use of a gravity model and panel data from western Europe, exchange rate uncertainty is found to have a negative effect on international trade. The results seem to be robust with respect to the particular measures representing exchange rate uncertainty. Particular attention is reserved for problems of simultaneous causality. The negative correlation between trade and bilateral volatility remains significant after controlling for the simultaneity bias. However, a Hausman test rejects the hypothesis of the absence of simultaneous causality